Japan’s looming election heightens chance of sales tax cut
By Leika Kihara
TOKYO, Jan 19 (Reuters) – Japan’s anticipated snap general election is increasingly likely to lead to a reduction in the consumption tax rate, as leaders of both ruling and opposition parties stressed on Sunday the need to do so to cushion the impact on households of rising living costs.
Japan levies an 8% consumption tax on food products and a 10% rate on other goods and services, providing a key source of funding for rising welfare costs in a rapidly aging population.
Shunichi Suzuki, general secretary of the ruling Liberal Democratic Party (LDP), highlighted the party’s earlier agreement with coalition partner Ishin to remove the 8% levy on food sales for two years.
“Our fundamental position is to sincerely carry out what is written in the agreement,” he said on a television program on Sunday.
The Mainichi newspaper reported on Saturday that Prime Minister Sanae Takaichi, when a general election is called next month, may pledge to temporarily remove the 8% levy on food sales.
The main opposition Constitutional Democratic Party of Japan (CDP), which agreed to form a new political party with Komeito, will also call for a temporary reduction in the tax rate, CDP Secretary-General Jun Azumi said in the same program.
Takaichi will likely hold a news conference later Monday to announce plans to dissolve parliament and call snap elections in February, capitalizing on his administration’s strong approval rating.
A reduction in the 8% levy on food sales would reduce government revenue by about 5 trillion yen ($31.71 billion) a year, according to government data, straining Japan’s already crumbling finances and increasing the risk of bond sales as investors focus on Takaichi’s expansionary fiscal policy.
($1 = 157.6900 yen)
(Reporting by Leika Kihara; editing by Paul Simao)
